After Some Neglect, Walmart US Catering to Core Customer

BENTONVILLE, ARK. - Although shopping by higher-end households is holding up, Walmart US is losing share among low and middle-income shoppers and will turn its attention to the core customer as it looks to drive top-line sales. "We're going to talk today about growth, top-line growth, and we see it coming from three places - our base core business, grow access to EDLP [everyday- low-price] through new store growth, and expand multi-channel," said Walmart US ceo Bill Simon during the company's annual analyst presentation earlier this month At the crux is Walmart's phased assortment project, which calls for: adding back some previously deleted items to assortments; identifying modular layouts that don't reflect the way consumers make purchasing decisions; analyzing departmental space impacts due to project impact stores; and product availability (shelf availability). Within that realm is Action Alley, which returned this in July - one month after Bill Simon became Walmart U.S.'s ceo and president. "Promotional intensity has returned with Action Alley," Simon said. Originally, Walmart brought it back with a heavy concentration on snacks and beverages. "Since then, we've seen a 65 basis point improvement in those items since before Action Alley was bright back [in July]." Simon explained that at Walmart brings back skus and gets back into Action Alley, "we are seeing a very slight bump in inventory," such as the recent 4% increase. He noted inventory is still lower than in 2007 and said the company's goal is to grow inventory at half the rate of sales. "We will add some [inventory], but we're not going back to where we were," he continued. "But we do have to support this initiative with some inventory." Looking to the fourth quarter and holiday, Walmart U.S. expects to see improvements for the period. Walmart's holiday offering will be tailored to serve its core $50,000 to $70,000 annual income customers, many of whom are unemployed and have seen their unemployment benefits run out, Simon noted. "This holiday season will be very, very strong price focus - we are ready for that. The priority will be on kids, and consumers will be focused more on needs than wants," he said. "We are ready to deliver, especially to our core customer." Simon said the environment is ripe for the retailer's return to its central focus on low- to middle-income shoppers. "Now is the time. We have an opportunity," he said. Over the past couple of years during the recession, Walmart made efforts to attract high-income bracket customers with enhanced product offerings and stepped-up price points. While that effort was successful on some respects, it backfired against the core shopper, ostracizing some of them and causing Walmart to lose some of their business and share of wallet. Noted in the slide presentation with Simon's talk, Walmart acknowledged that "Despite progress on many fronts, overall market share slipped slightly in 2011." Simon elaborated on that thought. "While we captured a new higher income customer, momentum was lost with our core customer." Walmart's core shopper generates 65% of sales, "and there is room to grow that," Simon went on. "Even though top group is growing, the bottom group overshadows that growth." Walmart now accounts for 31% of the low- to middle-income shopper's share of wallet - but the retailer thinks it can take more than 50%. Home is one area where Walmart sees it can balance the core customer with new higher-income bracket shoppers. James Barron, evp, softlines, said Walmart invested in improved quality and style within home, and is continuing with that same strategy into this next year. "Quality is something we've been working very hard on, benchmarking the best-in-class products in home," he said. "We're also focused on driving growth in the category, in towels, sheets, cookware, and many others, and we will continue with this approach with a good-better- best assortment in the new [fiscal] year."